Premature Distribution Law and Legal Definition

Individual Retirement Arrangement (IRA) is a healthy retirement plan account that enables to provide various tax advantages for retirement savings in the United States. Premature distribution is a withdrawal by the beneficiary from a qualified IRA retirement plan or tax-deferred annuity before the age of 59½. Premature distributions are subject to 10% early withdrawal penalty to discourage the money savers from spending his/her retirement benefits in advance. The penalty for the premature distribution is waived for first-time homebuyers, education expenses, medical expenses and Rule 72(t), which provides that a taxpayer can take IRA withdrawals before the age of 59½ by adopting at least five substantially equal periodic payments (SEPPs).